51% B2B payments still made by cheque

The digitalisation of finance has never been more advanced, yet the number of B2B payments made by paper cheque actually increased in the US last year.

According to new research from the Association for Finance Professionals (AFP), cheque payments increased by one percentage point since 2013. While it’s not a big uptick, this reverses the previous downward trend for less cheque payments being made.

Nor should the scale of the practice be overlooked, or the potential for disruption be underestimated with 51% of B2B payments still made by cheque.

While the use of cheques has been steadily falling since 2004 and last year’s one percentage point climb is surprising, overall use is still much lower than 81% in 2004 and 74% in 2007.

Faster payments

For many the advent of same-day ACH payments cannot come quickly enough. But what will they be used for?

The AFP Electronic Payments Survey, which is underwritten by JPMorgan, found that 57% of organisations say they intend to use same day payments to make last minute bill payments.

Some 38% of those polled said they plan to use same day ACH for emergency payroll.

Most treasury and finance professionals answering the survey are positive about same day ACH payments and 94% say it is important they’re smart and can carry extensive remittance data.

Meanwhile, some 70% of those polled said that it is somewhat or very likely that their organisations will shift most of their payments to electronic in the next three years.

For finance professionals, the cost saving benefits of electronic payments are among the most important advantages.

The UK’S Faster Payments system has been a great success and there are now number of faster payments moves happening the United States too.

“Treasury and finance professionals are indicating their support for same-day ACH because they see the value that it brings to last-minute payments,” says Jim Kaitz, president and chief executive of AFP.

“This should serve as a wake-up call for electronic payments vendors: How can you better serve and assist organisations to shift from checks to electronic payments?”

In an interview NACHA president Jan Estep talked about what same-day payments will mean and the challenges of making it happen:

”What that means is that any ACH transaction -a credit or a debit- can move between parties on the same day…It really is a complementary effort to, then, real-time payments, which is a different architecture, a different solution for different needs.”

Earlier this year, NACHA pointed to research that B2B payments are speeding up in the US, with NACHA (the Electronic Payments Association) reporting corporate trade exchange (CTX) volume up 7.2% and cash concentration and disbursement (CCD) up 8.2% year on year in 2015.

Drilling down into healthcare payments, the amount is up by 208m transactions or 39% during the period. So what do all those numbers actually mean? Well, at a high level they point to the growing shift toward electronic payments in the US, which is good news for businesses and their customers.

Another factor speeding that up is businesses sending data alongside data across the network, with NACHA saying almost 2bn records with invoice and other payment info was transferred last year, up 9.1% compared to 2014. Overall, ACH transaction volume climbed to more than 24bn electronic payments last year, up 1.3bn payments or 5.6% year on year.